these are the images the world is and seeing from the streets of canada. operations room today. welcome back here's a recap of our top stories on our t.v. u.s. warships are assembling near the libyan coast amid growing speculation of nato intervention in the oil rich country block the same time critics say the claims about colonel gadhafi assessing chemical weapons have a militant familiar ring. and as protesters in arab countries look for western support we take a look at history which suggests that it only backs democracies it can control and those that it can't in crushers will that was the case with hamas in gaza which was

denied international legitimacy for its opposition to certain interests. and also outrage after allegations that a u.s. psychological warfare unit used mind tricks on senators to secure more cash and troops raising fears over the military's reach into political life. well next max kaiser and co-host stacy herbert look at the impact the turmoil in the arab world is having on the u.s. economy because the report is coming up. and welcome to the kaiser report you know money printing but the central banks oh the whole lot of trouble. yes nexus causing revolutions all over the world but you might ask once again to hit america other than these union protests happening in

madison wisconsin what's going on in the u.s. well let's talk about this first headline here eighteen sobering facts which prove that the middle class is not being included in this economic recovery and i'm just going to go over some of them yeah let's are fairly you mention money printing of course that causes inflation and we see that in his point number five gasoline prices in the united states recently hit a twenty eight month high and you often talk about the fact that in fact gasoline prices is the most crucial of all so in egypt and tunisia wheat prices are very important because a large part of the average person's budget goes to food and this includes eating wheat based products in china it's rice in asia it's rice and in the united states is gasoline because essentially americans live in their car they drive from suburbs and excerpts into whatever job they might have and the heat. basically gasoline and

all of their manufactured products that's right gasoline is really the only point at which the average u.s. consumer makes contact with the economy in the global economy for this reason and kept artificially low for years as the basis for america's foreign policy is to invade a country still or gas and keep the people driving along another one number eight almost fourteen percent of all credit card accounts in the united states are currently ninety days or more delinquent right well this is a huge growing scandal because the banks. in order to feed the monster of their credit card business they keep offering more cards with more onerous rates and it's a huge ponzi scheme this is just another one of the ponzi schemes within the huge global american ponzi scheme that is collapsing burning made our style if we're comparing the us to the rest of the world in the middle east which is on fire now you have military dictatorships there and the united states we have

a financial dictatorship there so in that headline in this fact you see a sort of predatory behavior towards the population and fourteen percent of the population is even on able to pay their credit cards and what are you doing extending credit to them well i think that's correct you used the phrase financial dictatorship and it's just kind of a velvet dictatorship in that you believe that you're willfully just racking up huge debts on your credit card but then when you scratch the surface and you see that it's tied to let's say a food stamp industry that's financed by the likes of j.p. morgan to provide credit to go into debt to buy basic food as being resident prized by manipulation on the futures markets by the same j.p. morgan you understand that it's a dictator who's really if this ratings you use your word to disenfranchise the average person in a way that it's hard for them to notice that it's not about to go into their head it's about just quietly bankrupting them let's go to point number ten americans now

all more than eight hundred ninety billion dollars on student loans which is even more than they owe on credit cards so here is this real attack on the young generation which is what you see going on in the middle east these are the young rising up against the middle aged and older people who control this the military oligarchies there and the united states we have this financial darkies and the youth are the ones that have been bludgeoned more than any other oh it's sad really because that's your research and development costs. expense the government should not force their youth into indentured servitude to pay off the university and college loans that once again go to intermediaries like sallie mae and other so-called closet government sponsored entities to make bankers rich again but the government should want to increase educational standards increase the brain trust of america so that america can compete but by making students into debt slaves all

you're doing is making bankers rich these people can't compete on the global stage any more and it's a school of nearly short term view of how to run an economy obama i mean is where is this guy he's basically consigned the next generation to the scrap heap of history and i'm finally on this let's talk about number eleven because you talk about these young people having to compete on a global stage well average household that in the united states has now reached a level of one hundred thirty six percent of average household income in china average household that is only seventeen percent of average household income so there you go that these americans growing up who are saddled with student debts and now family debt they're having to compete against the chinese who not only have a better education system at this point have less regulation and as white have more freedom at this point but they have less debt well we've seen the financial

dictators at work in madison wisconsin the financial dictators go into the state assembly and they put their men in charge the recent republican political operative and they say either you strip the community of their wages and their rights or you are going to end up being prosecuted in some way nefarious way by the bankers themselves so those people in madison wisconsin now are being ushered into the into the gulag because of the financial dictators that are running riot in the country but also this but. debt burden on the young is also a great destroyer of innovation and entrepreneurship of course because it limits your options well let's let's you know contrast the experience of the donna says america in iceland they both went into the financial crisis iceland refused to pay the bankers debts they calmly went into a depression for two years another growing again and they're coming out of it the u.s. did the opposite they mollycoddled the banks they bailed out the banks they left

their population out to dry and now they're still in a depression and they're not going to come out of it now and you bring up madison wisconsin where the union members are being attacked by governor walker now this brings me to a next headline showing the decimation of american middle class before a one k. generation is beginning to retire and it isn't a pretty sight now the important thing is this chart and this is from the wall street journal you see there's a gap of thirty thousand three hundred ninety two dollars per year for americans who are retiring on for a one k.'s and the gap is only three thousand nine hundred eighty two per year for those americans who have pensions i bet workers who have rights are not suffering so badly as those who are you know free independent operators in the private market where we were told in the one nine hundred eighty s. when we were all put on cities for a one k.

reservations that this was the answer to have independence and take control of your own future well apparently it's not turned out so well no it's much worse actually because there's two underlying fundamental flaws in the assumptions number one that the current four a one k. plans are estimating that they can achieve four five six percent return on passive investments like bond investor and that's now no longer possible and won't be possible as the economy of the globe continues to collapse and number two of course is. price in u.s. dollars as the u.s. dollar is collapsing of course the price of imports in the price of gas and energy has been talking about is going higher so these retirement accounts as bad as they are there it's much worse yet and finally on that i mean they do recommend an article that americans are told to put nine percent in there for a one k.'s but because the stock market collapse in the bank or in fact that they're saying now oh you put fifteen percent below still more of it one way to

protect yourself from these banking shenanigans of course is gold and we hurried to the global stage where we're having to compete against chinese a chinese gold standard question mark china's grab for gold is accelerating at a rapid pace and it's reason questions about the country's ultimate intensions china consumed a hundred and seventy five point two tons of gold in the fourth quarter of two thousand and ten bringing its grand total for the year to five hundred seventy nine point five tons that's a lot of gold the u.s. in comparison consumed only two hundred thirty three point three times but we don't know intentions are they going to say they want to buy another fifty six thousand tons of gold and that's why i think they're making these strategic investments in europe because they will be paid back in gold bullion europe's got eleven thousand tons of gold and that's why they're buying things like g.l.d. which is the exchange traded for the new york stock exchange for large institutional players that you can take delivery in physical gold bullion so it's another way to increase their gold position of course are going to go through

a gold backed currency this will force other countries to do the same but old first increase the capital flow into the chinese economy while simultaneously devaluing against the dollar because they do have less than there isn't for not so they hold all the cards over there in china they're running the show but the propagandists here for the financial dictators are telling you don't worry number one first of all that i am f. the capital kalpoe of these financial darks technically a full gold standard isn't an option for china they say under the i. a massive first amendment to article four of agreement ratified in one nine hundred seventy eight participating countries are not allowed to peg their currency to gold and then john nadler from keiko dot com. he apologise for paper bags he also argues that trying to love growth too much to switch to a gold standard they would have to forget about eight percent growth he says well first of all i.m.f. people listen to me i am

a pole closer into the screen let me explain what is it about what about these two words don't you understand currency war what or what don't you understand about that in other words we're in a currency war there is no law there is no rule is to fall out of currency war china is not playing by the rules they have been playing by the rules for thirty years they're going to start playing by your rules that's ridiculous and of course aside in that of course standard swartz innovation is dead wrong of course entrepreneurial ism loves to have a barrier in which to entrepreneurially leap obo that's what makes the old saying that the system is the mother of invention when you have all your engineers going from mit and stanford into wall street to create financial derivatives and to financially engineer new products all that has resulted is a surfeit of trillions of dollars worth of paper and has stifled innovation paper currency stifles innovation

a gold backed currency would increase innovation as it have done for hundreds of years leading up to the nine hundred seventy one period when the world went on a pure paper feed currency standard and all had the relative valuations and the great fandango post nixon disco era oh shit moment show were trading like you do on the go or what's been happening i can't dance on this continue well i might say finally max that china is the world's biggest producer of fake goods so if. getting out of fake currencies and buying gold i would say you should too all right well that's all the time we have for right now stacey we're going to give me on the cars report thank you maggie right now though i want to come back i'll be talking with a fellow up here on the show about gold and so don't go away.

i want to maggie the pastor of part time now to go to london and speak with john butler founder of m. for a capital and publisher of the for a letter john was previously head of index strategies for deutsche bank in london

and before that he was managing director and head of interest rate strategy at lehman brothers in london john butler welcome to the kaiser report thank you max all right before i go any further i want to jump right in here and address a big issue that's circulating around the blogosphere principally from my chat block otherwise known as mess very well traffic blog site he says that the fed cannot control the long rate they can only control the short rate but having seen your presentation in london recently that's not true is it talk to us about this well i think i mean to be fair to michelle i'm somewhat familiar with his origin mince and i think that it's important wherever you talk about something happening in financial markets and you have some concept of time horizon and i think as a general rule he qualifies that view by pointing out that they can do practically whatever they want in the short term but in the long term there's no way it can

work and so there's maybe a little bit of subtlety in the argument but noise version of this is that even in the short term where people do except perhaps central banks have more influence that influence in the longer maturities out the yield curve is in fact for stronger than most people think it is in part. because the lower interest rates become the more long rates become correlated with short rates what i'm saying is that it's sort of taken for granted that the central bank sets interest rates at the short end but as you move out the long and they're set by the mortgage and under normal circumstances i would argue that's true but as you approach a zero interest rate that is a floor below which interest rates cannot go then mathematically almost by definition the link between short rates and long rates becomes stronger because you're approaching that zero bound so the central bank in fact has far more influence over long rates in a very low interest rate environment such as that we're in today i want to read you

a quote from an investment advisor on yahoo finance warning people not to listen to gold bugs here's the quote the precious metal asset class has no cash flow and no earnings it's only worth what someone else has is says it's worth well how do you respond to this well i respond to it first of all with a bit of a chuckle. there are times when earnings are uncertain and there are times when cash flows are uncertain and in fact there are times when those earnings and cash flows are being determined almost entirely by the order fishel monetary policies of central banks rather than being set by any reasonable free market in money and the more manipulation the more arbitrary policy you see being implemented around the world the more unsustainable you believe it all is the more you want to get away from those earnings you want to get away from those cash flows why because they carry the risk of devaluation and default if you don't want to take the risk of deflation devaluation and default you need to look elsewhere historically gold is

that elsewhere as are certain other real assets so people who are still looking at cash flow analysis when the cash flows are basically being determined arbitrarily by a central bank will they need to really trust that that central bank knows what it's doing and it really is doing what it says it's. which is to preserve price stability are they really their historical track record isn't very good in that regard let's look at china for a second there's talk that china might introduce a gold standard your thoughts on this and what about the argument that introducing a gold standard limits growth ok first of all the china issue there have been rumors going around for perhaps a year or two now that china was considering at some point pegging their currency to gold moving on to some sort of gold standard i certainly think that's possible and if you consider it from china's point of view i mean they've really got a huge problem you know your old saying is if you know if you owe the bank

a little bit of money you have a problem if you owe the bank a lot of money the bank has the problem well the united states owes china a lot of money and naturally the united states therefore has an incentive to try and make it easier to service that debt and of course devaluing your currency is historically the way that countries go about doing that sort of thing so china is very concerned they would like to find some way of moving away from the dollar but obviously there's not another major global currency which is an obvious replacement you might say the euro could be a replacement but the euro has issues right now with its own sovereign debt problems so it's quite logical that china would it at a minimum consider moving on to a gold standard whether they do it or not is up to them obviously the the other point. that you raise i mean. you need to when thinking about alternative investment generally when thinking about gold and silver generally i mean historically i mean these were the primary stores of value

i'm sure trying is not the only country thinking about moving in that direction but you know this idea that the comment was does introduce a gold standard limit growth and this is something they hear all the time but you know innovation i mean you have got only just finished this you know the idea of having a gold standard of course would fall. entrepreneur is to innovate and innovation creates jobs and jobs create growth what we've had the last ten or fifteen twenty years is all the innovation all the engineers have left mit and stanford and gone to wall street to create financial innovation which is create a lot of paper and america's competitiveness has dropped like a stone so you can't that argument doesn't hold water doesn't even make any sense so a gold standard wouldn't limit growth in fact in foster growth it would be the one thing that would create jobs and growth would be to make the rules fixed so that entrepreneurs knew what you know what they were what the game they were playing at but let's move on to something that you've been talking about in a in a most in

a recent newsletter john butler. you say that developed world stock market valuations have reached levels normally associated with major asset bubbles ok so forget about gold being in a blog because clearly we can talk about why it's not a bubble and talk about why stock markets are in a bubble so let's talk a little bit about that tom dollar talk about stock markets and how they've reached stretched valuations well i think you simply have in order to mount a stimulus of various kinds of have been thrown at the global economy and as i mentioned earlier one yields are inferior determined by the market but in the very low interest rate environment in fact central banks have a lot more control over the whole yield curve and they can bring yields down to levels which really just don't offer investors much in the way of an acceptable return so not only do investors consider alternative assets such as gold but they considered just equities and indeed some investors they really aren't allowed to

hold commodities in size they really aren't allowed to move into gold and so if you think. too low well then you're basically forced into the equity market and so part of what's happening is that investors are throwing their hands up and they think well given this very difficult choice this this dilemma we will hold equities because if we do get into an inflationary environment or as a result of all this money printing presumably equities will up perform vaughn's if you look at historical periods of inflation as a general rule equities have outperformed bones of course those periods however can be temporary because it's some point those valuations go so far that you get a real you get basically a feedback loop where people start piling into equities just because they're going up you start getting bubble like characteristics and then of course eventually it collapses almost regardless of what the central bank does it's starting to look a bit like that now pricing we're describing here is that the government and the wall street and they fused together now it's really become neo fascism in this way

in the united states they're able to corral investors into. overpriced markets by offering nothing in terms of alternatives so people go into the stock market looking for a two or three percent yield on a blue chip quote unquote s. and p. stock and they're buying these at absolute stress valuations only to have the rug pulled out from underneath them once again as we have happened so many times in the past and you mention the dot com bubble we don't see evidence of the dot com bubble however we do see evidence of an incredible bubble in these unlisted dotcom desk stocks like facebook and zynga facebook getting a fifty billion dollars valuation but goldman sachs it's not a publicly traded company to privately traded company they broke the law in allowing more than others the regulated number of people to invest in this state of course called the tax is above the law they're doing god's work but the valuations on those private companies are in the many tens of billions of dollars now so we are seeing actually a stealth nasdaq bubble and i'm what i'm hearing john butler is you think that

these valuations have reached the maximum point and would not be uncharacteristic for another big collapse coming for these stocks that could certainly happen but we need to think in currency adjusted terms if the dollar itself collapses i have no problem with u.s. stock market valuations going through the roof so if you do get a serious pickup in inflation or god forbid hyper inflation occurring in the u.s. or elsewhere the stock prices go up in nominal terms but in real terms in purchasing power terms in wealth preservation terms the stocks are overvalued here in particular versus alternative assets which do not carry devaluation default risk such gold right so. you know it's not an alternative asset you know gold gold's been the main asset for thousands of years how these guys been able to propagandize to such an extent as to make gold quite an alternative investment how does how are they able to do that how are the paper bugs able to push their agenda so

successfully well people. generate fee income by originating risk by selling paper into the market and by trading it back forth and sideways once it's out there these people nationally have an incentive to talk about financial assets and to talk down alternatives you're absolutely right for most of history gold was hardly an alternative it was front and center of the global monetary system and even in day to day transactions gold was used although silver was more common for that purpose so you're absolutely right but the industry does have a huge incentive a huge bias to tout paper forms of wealth because after all it's by creating that in trading that they get paid we need to be very skeptical that there's like an inherent conflict of interest between an institution that makes money by originating and selling paper in trading paper and their take on the relative attractiveness of paper versus something else i finally we've got about less than a minute left i just wanted to get your take on this idea what was talked about

recently of davus that the world needs to create a new one hundred trillion dollar lending facility to recapitalize and bail out the entire global economy of course it would be two times the global g.d.p. that's one hundred trillion dollars in credit would something like this the paper bonds is just a last stand. and basically it couldn't succeed or is that just basically fanciful talk and we shouldn't even take that as ever possibly going to succeed because it's completely nonsensical john boehner well you can't put it past them i mean the fact is that history is littered with examples of policymakers doing increasingly desperate things when in fact those things are increasingly counterproductive i think the evidence is increasingly clear when you see out of control food price inflation around the world to the extent it is toppling one government after another i think it's clear that throwing money at the problem isn't working and for them to claim that just a little bit more money will somehow miraculously be enough is well. to be honest

it sounds a bit pathological it's as if these people are pathologically pursuing a policy of printing as if it's somehow a panacea will it's not it's causing disasters in one country after another they should have stopped throwing money at the problems a long time ago and started allowing economies to restructure naturally without artificial stimulus both monetary and fiscal they're digging themselves a deeper hole but first thing to do is stop digging it will be painful at first but ultimately it will lay the foundation for getting out of that hole unfortunately sadly the incentive structure for politicians is in some ways is screwed up is that for modern financial institutions and we just can't expect when their conflict of interest is such that they want to remain in elected office we just can't expect them to make the tough choices we're going to have to do that for ourselves it's not economics it's pathological i agree with john ballard thanks so much for being on the kaiser report thank you max all right that's going to do it for this edition

of the hour with me max kaiser and stacey had been with my guest john butler c.e.o. of m. for a capital if you want to send me an e-mail please do so kaiser report at r t t v are you until next time this is the exposure thing audio. from. home.

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